Corporate social responsibility and tax avoidance : Egypt evidence

Abstract EN

Purpose – This paper aims to investigate the association between Corporate Social Responsibility (CSR) performance and tax avoidance (TA) across a sample of Egyptian firms.

Design/ methodology/ approach – Using the Egyptian Corporate Responsibility Index (S&P/EGX ESG Index) and extracting accounting data from the annual reports of non-financial companies listed on this index, a data analysis on a sample of 179 firm-year observations for a nine-year period beginning in 2007 was used.

Findings –The empirical results of the multivariate regression indicated that Egyptian companies active in CSR are less likely to engage in TA practices.

This evidence is consistent with the notion that paying the fair share of taxes is a part of firm's CSR package.

Practical implications – The findings of the study also have policy implications, by providing a better comprehension of TA practices and CSR that might be in favor of numerous investors, regulators and academics interested in firms' tax behavior.

Besides, it also helps tax administrations to identify the conditions under which the risk of aggressive tax practices increases, thus helping to formulate effective tax systems that improve the level of firms' tax liability.

Originality/ Value – This study is the one of the first studies that examines the relationship between CSR and TA practices in Egypt.

In addition, this article provides an empirical evidence on this relationship from the Egyptian environment that is different from other cultural and institutional environments in which previous studies were conducted.